Within the broader four-year presidential cycle, midterm election years historically represent the weakest phase, typically yielding low single-digit average returns. This stands in sharp contrast to the robust performance often seen during pre-election years. While 2025 (a post-election year) concludes with solid gains of approximately 17–18% for the S&P 500, traders and investors should anticipate the elevated volatility in 2026 that is consistent with these established seasonal patterns.
The chart above illustrates the average seasonal performance of major US indices—including the DJIA (blue), S&P 500 (black), NASDAQ (green), and Russell 2000 (grey)—during midterm election years from 1949 to 2024. These indices follow a consistent trajectory: a period of weakness from January through September, with cumulative declines of 2–8%, followed by a robust fourth-quarter recovery that typically pushes annual returns into positive territory.
The next chart focuses on the S&P 500, comparing the broader midterm average (blue) against specific subsets, such as the sixth year of a presidency (red), second-term Republican midterms (green), and the Stock Trader’s Almanac aggregate cycle (black). Across all categories, early-year gains eventually yield to mid-year volatility. However, a strong rally consistently emerges from October onward, with the aggregate cycle historicaly producing the most reliable year-end upside.
The next chart focuses on the S&P 500, comparing the broader midterm average (blue) against specific subsets, such as the sixth year of a presidency (red), second-term Republican midterms (green), and the Stock Trader’s Almanac aggregate cycle (black). Across all categories, early-year gains eventually yield to mid-year volatility. However, a strong rally consistently emerges from October onward, with the aggregate cycle historicaly producing the most reliable year-end upside.
Historically, the second-term Republican midterm cycle (green line) begins with a minor January dip, followed by a steady ascent that peaks at roughly 6-8% by June. After third-quarter volatility—where gains typically compress to a 1% floor in September—the market historically enters a robust year-end rally, frequently exceeding 8% by December.
Historical performance of the S&P 500 (1950–2024) based on the four-year US Presidential Cycle:
Average "intra-year pullback" (temporary market drops) against the "average return one year
after those lows": Midterm Years see both the largest pullback, and the best recovery rally.
Average "intra-year pullback" (temporary market drops) against the "average return one year
after those lows": Midterm Years see both the largest pullback, and the best recovery rally.
Historical S&P 500 Peak-to-Trough Declines in Midterm Election Years, 1950-2022.
The
table above details historical S&P 500 peak-to-trough declines
during midterm election years from 1950 to 2022. These corrections
averaged 17.3% over 115 calendar days, typically peaking in late April
before bottoming in mid-August. While the median decline was slightly
lower at 17.2% over a shorter 70-day window, the recovery profile
remains impressive: one year after reaching the trough, the index posted
an average return of 31.7%.
The next table illustrates the four-year presidential cycle by analyzing forward 24-month S&P 500 returns, measured from July 1 of each term year since 1933. The data categorizes returns by inaugural, midterm, pre-election, and election years, yielding average gains of 27.6%, 36.5%, 24.0%, and 16.7%, respectively. Notably, the 24-month window following the start of a midterm year represents the strongest phase of the cycle, whereas the election-year window is the weakest and contains the most frequent instances of negative returns.
Beginning in July 2026, the S&P 500 will enter its statistically strongest 24-month window of the four-year presidential cycle. Since 1942, every 24-month period initiated in July of a midterm year has delivered positive returns—a perfect 21-for-21 track record—with an average gain of 36.5%.
The Four-Year Presidential Cycle in line with the Decennial Cycle.
An integrated analysis of decennial, presidential, and seasonal cycles projects an annual return of up to 12% for the S&P 500 in 2026. The seasonal pattern anticipates a strong first-quarter rally, peaking between late February and mid-April, followed by an initial pullback. The market is expected to remain choppy through August before entering a period of seasonal weakness in early fall. This culminates in a significant trough around the beginning of the 4th quarter, which should serve as the launchpad for a robust year-end recovery.
See also: